Allahabad High Court Upholds GST Penalty for Missing E-way Bill and Invoice at Interception

Allahabad: The Allahabad High Court has dismissed a writ petition challenging a penalty imposed under Section 129 of the Goods and Services Tax (GST) Act, holding that the absence of a valid e-way bill and invoice at the time of interception raises a rebuttable presumption of intent to evade tax. The court found that the petitioner failed to provide a reasonable explanation to rebut this presumption.

The judgment was delivered by the Hon'ble Shekhar B. Saraf , J. , on March 01, 2024, in the case of M/s Jhansi Enterprises vs. State of U.P. and Others (Writ Tax No. - 1081 of 2019).

Case Background:

The petitioner, a registered GST dealer, was transporting a consignment of TMT Bars. On March 10, 2019, the vehicle carrying the goods was intercepted by the Assistant Commissioner, Commercial Tax (Mobile Squad). At the time of interception, neither an e-way bill nor other documents like the tax invoice were produced. An e-way bill was subsequently generated about 1 hour 30 minutes after the interception time but was not accepted by the authorities.

A show cause notice under Section 129(3) of the Act was issued, alleging contravention of the Act's provisions. The petitioner's explanation cited the unavailability of a computer operator and claimed the invoice was handed over to the receiver firm before interception. Dissatisfied with the reply, the authorities passed a penalty order demanding tax and penalty, which the petitioner deposited to secure the release of goods. The statutory appeal against this order was also dismissed by the Additional Commissioner.

Arguments Presented:

Petitioner's Contentions:

• The vehicle was parked for unloading at the time of interception, not in transit.
• Delay in e-way bill generation was due to the computer operator's non-availability.
• The e-way bill was generated before the formal interception memo was issued, indicating no intent to evade tax.
• Section 129 applies only when goods are in transit.
• All documents were produced before the seizure order was passed.
• Tax was already paid and disclosed in returns, proving no intent to evade.
• Cited several past judgments (pre-April 2018) holding that seizure and penalty are not justified if the e-way bill is downloaded before seizure and tax is charged, or if there's no intent to evade tax.

Respondent's Contentions:

• Rule 138 requires the e-way bill to be generated before the commencement of goods transportation.
• Documents were missing at the time of interception, clearly violating the rules.
• The explanation for delay was vague; compliance was obligatory.
• Section 129 does not specifically mention 'mens rea' (intention to evade tax).
• Relied on the Hawkins Cookers Limited vs State of U.P. and Others judgment, which held that a wholesale disregard of rules (like absence of invoice/e-way bill) can raise a presumption of intent to evade tax, although it is rebuttable.
• Cited recent judgments (post-April 2018) from Calcutta and Kerala High Courts which upheld penalties for non-compliance, noting the improved e-way bill system.

Court's Analysis and Decision:

Justice Saraf acknowledged that while intention to evade tax is a relevant factor for imposing penalties under Section 129, the admitted fact that neither the invoice nor the e-way bill accompanied the goods at the time of interception constitutes a clear contravention.

The court reiterated its stance from M/s Akhilesh Traders V. State of U.P. and 3 others , stating that "in the event the goods are not accompanied by the invoice or the e-way bill, a presumption may be raised that there is an intention to evade tax. Such a presumption of evasion of tax then becomes rebuttable by the materials to be provided by the owner/transporter of the goods."

Applying this principle, the court found that the petitioner failed to rebut the presumption of tax evasion. The explanation regarding the computer operator was deemed insufficient and lacking proper justification for the non-production of documents at the correct time. The court emphasized that merely furnishing documents subsequent to the interception is not a valid ground to negate the intent to evade tax unless the initial absence is reasonably explained.

Furthermore, the court distinguished the petitioner's reliance on older judgments, noting that they pertained to a period (prior to April 2018) when there were genuine difficulties in generating e-way bills. These difficulties, the court observed, have since been resolved.

Finally, the court rejected the petitioner's argument that the vehicle was parked for unloading, stating that the location of interception was away from the godown, rendering the argument an afterthought.

Concluding that the petitioner did not comply with the provisions of law and failed to rebut the presumption of evasion, the court held that the actions taken by the respondent authorities were proper and in accordance with the law.

The writ petition was accordingly dismissed .

This judgment underscores the critical importance for transporters to ensure that goods in transit are accompanied by the mandatory e-way bill and invoice at all times, as failure to do so creates a strong legal presumption of tax evasion under Section 129 of the GST Act, placing a heavy burden on the taxpayer to prove otherwise.